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Warehousing & Operations - Part 1: Leveraging the process for ecommerce growth

When we think about the multi channel business process, it’s easy to focus on sales and profit. We have our customers at the front of our minds, and we’re focused on attracting their attention with good products at fair prices and converting them into delighted buyers – and hopefully delighted repeat buyers. The moment the delivery truck turns up at our warehouse, however, we start to incur costs. A salaried member of staff books or scans the deliveries in, checking that we have received exactly what we ordered. Then he or she allocates each product to a warehousing location. The products get moved from the delivery area to different but specific part of the warehouse where we know we can find them again, perhaps using other members of staff, operating machinery like fork-lift trucks to get the product stored in the right warehouse, aisle, shelf and bin number.

After the transaction occurs, our back office operations adjust stock levels, process payments and post to our accounts systems. From there, we incur fulfillment and dispatch costs, and finally customer service costs. If the customer decides they don’t want some or all of the items in their package, then, depending on our returns and credits policy, we have to do things in reverse at our expense, taking the returns back, warehousing them, doing the back office checks and balances, until the product is sold again.

 

What makes a good process?

It follows then, that the better you are at managing these costs, the more profit you’ll make. The converse is also true. Companies with disorganised warehousing and lack of control over their operational processes suffer unacceptably high costs from mistakes and inefficiencies. Costs that can turn a business into a broken business. It’s all about having the right ‘house rules’, since before the items get to the buyer’s house, we need to keep them in our house. The three assets that input into these rules in any organisation are the people in our warehouse and operations, the processes we follow, and the systems we use, and we have to work hard to manage them. Unfortunately, plenty of challenges exist in these areas.

It’s hard to get the resourcing right in the warehouse. Some staff are more experienced and productive than others, getting through the work more quickly and with fewer errors. Some staff are permanent, whereas others are temporary, brought in to cope with seasonal fluctuations, and there will naturally be differences in abilities and workload.

In any warehousing or accounting situation, there is also the potential for fraud – unfortunately. Mistakes happen and items or parts of larger items can genuinely go missing. Sometimes though, the disappearances are the result of deliberately coordinated efforts to defraud the business, with very damaging impacts on staff morale and business profitability. In the pre-computer days, if you sold large valuable items like a snooker table for example, an unscrupulous and careful operative might take 12 months to ‘accumulate’ all the parts they needed to build their own table. Theft is a tricky subject to broach in any business, especially without a solid audit trail.

 

How the Volo system can help

When it comes to our processes, the more manual and the less fluid they are, the more costly they are. They’re more time-consuming, involve more people, and are more prone to more mistakes and inaccuracies. It’s easy to feel like as long as the problems get sorted and the customers get they want at the end of the day, that’s OK. The reality is that the sum of these small inefficiencies adds up to something quite significant, like an extra one or two permanent members of staff. We've never met a Volo customer who didn't feel like the system saved them at least 2 full-time staff.

Finally, those merchants dealing with virtual stock where their suppliers receive the purchase order and fulfill and dispatch the product to the buyer on the merchant’s behalf also need to have processes in place to handle this way of selling. To further add complexity, what is the right set of processes for returns and credits for each of these supply chains?

Click here to find out how to create a seamless Warehousing & Operations process.

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